In a strategic move to diversify its portfolio, cryptocurrency exchange giant Kraken is set to venture into the realm of traditional finance by offering trading in US-listed stocks and exchange-traded funds (ETFs). This significant development marks a pivotal shift for the 12-year-old company, hitherto rooted exclusively in the world of cryptocurrencies.
Sources privy to the matter, who requested anonymity due to the sensitive nature of the information, revealed that Kraken will initially roll out this new service in both the United States and the United Kingdom through a newly established division named Kraken Securities. Notably, the company has already secured the requisite regulatory approvals in the UK and has submitted an application for a broker-dealer license with the Financial Industry Regulatory Authority (FINRA) in the US.
Insiders indicate that Kraken is aiming for a targeted launch of the service in 2024, a move that showcases the company’s intent to embrace traditional financial markets amid an evolving cryptocurrency landscape.
Established in 2011, Kraken stands as one of the pioneering names in the crypto space, having weathered numerous bear markets, including the recent downturn that witnessed the collapse of industry players like FTX and Celsius Network. The foray into equities comes nearly two years after Bitcoin reached its pinnacle at nearly $69,000, giving rise to a phase dubbed as the “crypto winter,” which has tempered the industry’s once-meteoric appeal and dampened trading volumes.
Kraken’s CEO, Dave Ripley, embarks on this venture in a fiercely competitive arena, with established zero-commission players such as Robinhood Markets Inc. and Public.com already commanding a strong presence. Moreover, this move follows the subsiding fervor of retail trading spurred by the Covid-19 pandemic. Public.com, for instance, expanded into the UK in July, while Robinhood is gearing up to introduce brokerage services to individuals in the country later this year.
Upon the commencement of stock trading on Kraken’s platform, eligible customers will be prompted to activate the service. Upon activation, Kraken users can expect to view their combined portfolio of cryptocurrencies, listed stocks, and ETFs as a unified balance, according to the undisclosed source.
In a parallel endeavor, Kraken is actively expanding its prime brokerage services and is on the brink of introducing a qualified custodian tailored for institutional clients in the imminent weeks. This custodial service will operate independently from the exchange, and Kraken has sought approval from the state of Wyoming for its implementation, the source added.
Responding to queries, a spokesperson for Kraken declined to comment on the matter. The UK’s Financial Conduct Authority (FCA) and a representative from FINRA also refrained from providing immediate comments regarding the development.
Despite a notable drop in trading volumes this year, Kraken has managed to secure a larger market share. This surge comes largely at the expense of industry leader Binance, which was established six years after Kraken and has faced increased scrutiny from global regulators in recent times. As of the latest data from CCData, Kraken’s share of the global spot trading market stands at an impressive 3.5%, the highest recorded since 2018.
Source: Bloomberg
